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  • bluecheese4u bluecheese4u Feb 12, 2013 2:18 PM Flag

    Senate Energy Committee lawmakers search for 'sweet spot' on natural-gas exports

    Senate Energy Committee lawmakers search for 'sweet spot' on natural-gas exports

    By Zack Colman - 02/12/13 01:08 PM ET

    Republicans on the Senate Energy and Natural Resources Committee said market forces would pinpoint a “sweet spot” for expanding natural-gas exports, while Democrats were less convinced during a Tuesday hearing.

    An Energy Department (DOE)-commissioned study released in December occupies center stage in the export discussion. The study concluded that the U.S. economy stood to gain from sending more liquefied natural gas (LNG) abroad, though it would raise domestic prices minimally.

    Both Republicans and Democrats agreed Tuesday that enhanced exports invited economic opportunity, adding how to reach the right amount required further investigation.

    Some of the most vocal cheerleaders of expanding exports — largely Republicans and some business groups — say shipping more LNG overseas would create jobs, encourage more natural-gas drilling and bring revenues to the federal government.

    They also say the application process and energy markets will naturally restrain exports by filtering out less serious developers, keeping domestic price jumps modest.

    “I think we also need to include within this discussion an understanding of the role the market forces will play not only on domestic prices but on the number of projects that may actually be built,” committee ranking member Sen. Lisa Murkowski (R-Alaska) said Tuesday.

    Still, some Democrats — including committee Chairman Ron Wyden (D-Ore.) — were more skeptical. They instead hoped of finding a middle ground between a major increase and current export activity.

    "Let's look before we leap," Wyden told reporters after the hearing. He was noncommittal on whether hitting that "sweet spot" would require legislation.

    Those Democrats, along with some manufacturers, contend exporting too much LNG would raise domestic natural gas prices. They say that would undercut a resurgence in U.S. manufacturing.

    “Instead of a manufacturing renaissance, major gas consumers could find themselves hit hard with energy price hikes and forced to sideline job-creating efforts,” Wyden said in his opening remarks.

    Currently, DOE reviews all LNG export applications to ensure they are within the public interest. Deals with nations that have a free-trade agreement with the United States get approval more easily than those that don’t.

    Those pushing for a lighter touch on exports want to ease restrictions for countries that lack a free-trade agreement with the U.S.

    Some of those nations, such as Japan, are seeking U.S. natural gas. A bipartisan group of senators has backed legislation that would permit LNG exports to NATO allies and Japan, even if they don’t have a free-trade pact with the U.S.

    Republicans and industry groups said Tuesday that several factors would check an unfettered expansion of exports, helping to keep price hikes small.

    Oil-and-gas firms say processing costs from converting natural gas into its transportable, liquefied form would eat at profit margins. That will likely subdue much of the initial export interest, they say.

    Ross Eisenberg, vice president of energy and resources policy with the National Association of Manufacturers (NAM), noted Tuesday that while DOE is weighing 16 export applications, the next step — going through the Federal Energy Regulatory Commission — is more costly for prospective exporters.

    Eisenberg, whose group supports boosting exports, said few applicants would go through that process. That second stage would require developers to strike a contract with a buyer and conduct an environmental impact statement, among other measures.

    The natural-gas price gap between the U.S. and Asia also is likely to close in the long term, which should temper some of the export frenzy, Kenneth Medlock, a professor at the Baker Institute for Public Policy at Rice University, said in testimony.

    Still, Andrew Liveris, chief executive of Midland, Mich.-based Dow Chemical, urged a “cautious approach” on expanding exports.

    He, like Wyden said and as Sen. Debbie Stabenow (D-Mich.) — who opposes exporting more natural gas — hinted Tuesday, argued the DOE-commissioned study used outdated information that understated domestic natural-gas demand.

    Liveris’ firm has been at the forefront of advocating export restraint out of concern for price increases. He said Tuesday that lawmakers should be mindful of speculators looking to bank on LNG.

    “We should not let the market … set the price domestically,” Liveris said Tuesday.

    Wyden said he was looking for an environmental and economic “sweet spot” on exports.

    Wyden noted the need to balance the jobs potential of LNG exports with possible domestic price increases and concerns about hydraulic fracturing, or fracking, the drilling method credited with driving the U.S. energy boom.

    Fracking involves injecting a high-pressure combination of water, sand and chemicals into shale rock to tap natural gas and oil.

    Environmentalists and some Democrats worry about the amount of heat-trapping methane the drilling method releases into the air, and also fear the process contaminates drinking water.

    Meeting new natural-gas demand from boosting exports would largely be met by ramping up fracking, according to the U.S. Energy Information Administration. That has alarmed green groups and some Democrats.

    Frances Beinecke, president of the Natural Resources Defense Council, said Tuesday that the U.S. “lacks those safeguards” necessary to protect the public from fracking.

    Industry and many lawmakers contend fracking is safe. They also point to the effect inexpensive natural gas has had on reducing carbon dioxide emissions, as power plants have turned to that energy source rather than coal.

    The abundant supplies of natural gas would not be possible without fracking, its backers note. And while many Democrats have pushed for federal rules governing the practice, industry and Republicans want the states to control fracking.

    “NAM believes states should continue to be the main regulators of this industry and is concerned that reactive federal regulation could harm any potential gains resulting from increased exploration of shale oil and gas,” Eisenberg said in written testimony.


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